 |
 |
08 May 2024
Slower-than-expected recovery in telecom and other key markets remains offset by continued strength in AI-driven datacoms.
Coherent, the widely diversified provider of optics and photonics technologies, has posted sales revenues of $1.21 billion for the opening quarter of the year - down slightly on the same period last year, but above the range that it had predicted in February.
Combined with hefty debt and interest payments for loans used to finance the merger of II-VI and the original Coherent lasers business two years ago, that drop in sales resulted in a net loss of $13.2 million for the latest period.
The US firm’s cautious update reflects a complex picture across the broad range of applications and markets in which its products are used, but largely a continuation of strong traction for high-speed optical transceivers supporting the global growth of AI services, amid subdued demand elsewhere.
OLED displays
Outgoing CEO Chuck Mattera, who announced his pending retirement in February, highlighted a slower-than-expected recovery in telecommunications as one drag on sales in the latest period, although there were some positive indications as orders for industrial lasers rose 17 per cent year-on-year.
“While still early, we also saw further signs in the quarter of improving demand in our industrial market, along with further signs of stabilization in our instrumentation and electronics markets, which we expect will also eventually return to growth,” Mattera said during an investor call discussing the latest results.
And in a shareholder letter detailing the latest developments, the company added that orders for industrial lasers were now at the highest level for more than a year - partly thanks to demand for manufacturing organic LED (OLED) displays.
“Our display service revenue increased by almost 30 per cent from the year-ago quarter, primarily driven by the ongoing increase in OLED fab utilization and depletion of service spare parts inventory,” noted the firm’s executive team.
“OLED growth is being driven by further adoption of OLED into smartphones, increasing OLED adoption into tablet and laptop computers, and a rebound in smartphone sales volumes from the lowest levels in a decade.”
Apple no longer core
In the latest quarter, Coherent’s lasers business unit contributed sales of $351 million, down 4 per cent year-on-year. In comparison, the company’s networking division reported a record-breaking total of $619 million, up 12 per cent over the same period.
That increase was primarily driven by an almost 80 per cent sequential jump in sales of AI-related 800G datacom transceivers, which totaled close to $200 million in the quarter.
The Coherent team reckons that the high level of demand will continue into next year, and is now preparing to release its next generation of transceivers, which will operate at 1.6 Tb/s.
Initial sampling of the 1.6T devices is slated for the September quarter, with a full commercial launch pencilled for the start of 2025.
When compared with last year, Coherent’s sales revenues are most obviously being impacted by a huge drop in sales of VCSELs to Apple for 3D sensing capability in iPhones.
The photonics company says that its sales into electronics applications - which includes silicon carbide power devices as well as sensing VCSELs - amounted to $74 million in the latest quarter, down 50 per cent year-on-year. For comparison, Apple had accounted for close to $500 million of annual sales in Coherent’s fiscal 2023 period.
“Our consumer electronics revenue has declined to 3 per cent of total revenue from 10 per cent of total revenue in fiscal 2023, driven by a design change at our largest consumer electronics customer,” Coherent noted.
New platforms
In a bid to replace some of that lost revenue, the firm is looking towards applications in health monitoring and biosensing, AR/VR hardware and wearables, as well as automotive lidar and in-cabin sensing.
“We have a number of new platforms that we expect to enhance our already strong competitive position, including multi-junction VCSELs, backside-emitting VCSELs, and indium phosphide sensors and detectors for biosensing,” it added.
The latest quarterly results also revealed that Coherent has negotiated a lower interest rate payable on a $2.4 billion term loan, a large chuck of the $4.1 billion of long-term debt currently on its balance sheet.
That should deliver annual savings of around $9 million for the company, which has incurred cumulative net interest expenses of close to $200 million over the past three quarters.
Mattera and his colleagues now expect sales of $1.23-$1.32 billion in the June quarter - which represents the end of the company's fiscal year 2024 - likely bringing the annual total to around $4.65 billion, down from $5.2 billion in fiscal 2023.
• Following the latest update Coherent’s NYSE-listed stock price is trading at close to $55, equivalent to a market capitalization of around $8.4 billion and double its valuation a year ago.
 |  |  |  |  |  |  |
| © 2024 SPIE Europe |
|
